FirstGroup says it has no intention of giving up the TransPennine franchise.
Photograph: Christopher Thomond for the Guardian

The chief executive of FirstGroup, which runs buses in numerous UK cities and the Great Western, South Western and TransPennine rail franchises, has been ousted after the company slumped to a £326m loss.

The troubled Aberdeen-based rail and coach operator, which has said it is exploring options including a sale of the US bus group Greyhound, also said it remained committed to the TransPennine contract despite revealing it would lose more than £110m running the franchise.

“The time is right for me to step aside,” O’Toole said. “Today’s results clear the way for the new approach sought by our chairman and the board.”

He will be replaced by the executive chair, Wolfhart Hauser – who said the board was “disappointed” with the company’s financial performance – while a successor is sought.

“This year’s results fell short of our ambitions – we are disappointed that we did not make the further progress we intended based on the trends we saw at the end of the previous financial year,” Hauser said.

Hauser, 68, said that after eight years it was not such a surprise that O’Toole had left so abruptly.

“I think if you look at his age (62) it is not totally all of a sudden,” he said. “The board thought at this time it is very important to have a fresh view in relation to strategy.”

Matthew Gregory, FirstGroup’s finance chief, said external consultants had been appointed to review all options for the Greyhound business, including a sale.

“We are not giving up the fight for this business,” he said. “There is a root-and-branch review and all options are on the table. Our obligation is to maximise value for shareholders.”

Profits at Greyhound slumped 39% to £25.5m as the bus group’s long-haul business took a battering amid increased competition from low-cost airlines in the US.

FirstGroup made a £277m non-cash write-down on Greyhound to take into account the change in value of the business resulting from the shift in how people are choosing to travel.

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The company also made a £106m non-cash charge relating to the losses it believes it will rack up for the remainder of the life of the TransPennine rail contract, which runs until 2023.

Gregory said FirstGroup was not seeking to hand back the contract for the heavily loss-making franchise, which it has run since 2016. It lost £6.5m in the year to the end of March.

“As of today we are committed to meeting the obligations of that franchise and are not walking away from it in any way, shape or form,” he said. “We can’t rule out the losses will get to a higher level – or possibly get to a lower level – this is our best estimate at the moment.”

In April the group rejected a takeover approach from the US private equity group Apollo. Earlier this month, the shareholder West Face Capital urged FirstGroup to sell the £1.4bn company, break it apart or spin off its North American operations.

Net debt fell from £1.3bn to £1bn year on year.

O’Toole, who was paid £1.26m in the previous financial year, will receive a payoff which will be revealed in FirstGroup’s annual report next month. The company would not comment on the level of the payout. However, O’Toole’s contract stipulates a 12-month notice period, so he will be negotiating a portion of the £1m he receives annually in pay and pension because of his sudden departure.